Names In the News

Elevating Profits

What goes up must come down.                           

The European Commission (EC) in February fined the elevator firms Otis, KONE, Schindler and ThyssenKrupp groups $1.3 billion for operating cartels in the installation and maintenance of elevators and escalators in Belgium, Germany, Luxembourg and the Netherlands.

The decision names 17 subsidiaries of the companies, together with Mitsubishi Elevator Europe, which participated in the Dutch cartel. Otis alone estimates that the equivalent of the entire world’s population travels on its elevators, escalators and moving walkways every nine days.

Between at least 1995 and 2004, the EC charged that these companies rigged bids for procurement contracts, fixed prices and allocated projects to each other, shared markets, and exchanged commercially important and confidential information.

The effects of this cartel may continue for 20 to 50 years as maintenance is often done by the companies that installed the equipment in the first place.       

By cartelizing the installation, the companies distorted the markets for years to come, the EC says.    

KONE subsidiaries received full immunity from fines under the EC’s leniency program related to the cartels in Belgium and Luxembourg — they were first to provide information about these cartels.      

Similarly, Otis Netherlands received full immunity related to the Netherlands cartel.

The fines imposed on the ThyssenKrupp companies were increased by 50 percent, as it is a repeat offender.       

These are the largest fines ever imposed by the Commission for cartel violations.

“It is outrageous that the construction and maintenance costs of buildings, including hospitals, have been artificially bloated by these cartels,” says Competition Commissioner Neelie Kroes. “The national management of these companies knew what they were doing was wrong, but they tried to conceal their action and went ahead anyway. The damage caused by this cartel will last for many years because it covered not only the initial supply but also the subsequent maintenance of lifts and elevators — for these companies the memory of this fine should last just as long.”

Ney Sentenced  

Former Congressman Robert Ney was sentenced in January to 30 months in prison, to be followed by two years of supervised release, and fined $6,000.     

Ney pled guilty in October to a two-count information charging him with conspiracy to commit multiple offenses.

Ney admitted that he engaged in a conspiracy beginning in approximately 2000 and continuing through April 2004, wherein he corruptly solicited and accepted a stream of things of value from disgraced lobbyist Jack Abramoff, Abramoff’s lobbyists and a foreign businessperson, in exchange for agreeing to take and taking official action to benefit Abramoff, his clients and the foreign businessperson.

Ney accepted international and domestic trips, meals and drinks, concert and sporting tickets and tens of thousands of dollars in campaign contributions.

In exchange, Ney admitted, he opposed legislation, inserted statements into the Congressional Record and supported a license application for a contract to install wireless telephone infrastructure in the House of Representatives.

Ney also admitted that he accepted tens of thousands of dollars worth of gambling chips from a foreign businessperson who was hoping to sell U.S.-made airplanes and airplane parts in a foreign country.

Ney agreed to help the businessperson with obtaining an exemption to the U.S. laws prohibiting the sale of these goods to the foreign country and with obtaining a visa to travel to the United States.

“Today’s sentence makes it clear that our government is not for sale,” said Assistant Attorney General Alice Fisher.

MBA Ethics

Only one quarter of the top U.S. business schools require a stand-alone ethics course before graduation.

But that figure is up from just 5 percent 20 years ago.

That’s according to a 2007 study appearing in the Journal of Business Ethics.

The authors of the report surveyed the top 50 global MBA programs, as rated by the Financial Times.

The study’s authors questioned the deans or key officials of the 44 responding schools. They report a keen interest among deans and students in the three areas surveyed — corporate social responsibility, ethics and sustainability.

The study’s authors found that nearly one third of the responding schools require coverage of all three topics in the MBA curriculum.

Laura Hartman, a professor of business ethics at DePaul University in Chicago and one of the authors of the study, says, “But that is not enough. Ethics also need to be integrated into the day-to-day business curriculum. Integration means that the faculty in the other disciplines need to know what is going on in the ethics course. And second, integration means they raise ethical issues in the finance course or the marketing course.”

— Russell Mokhiber